Well, this was inevitable. Inevitable since long time back, when the Indian government failed to provide the support needed to keep single screen theaters going. Theatrical releases of Indian films have been dying since satellite TV and multiplexes arrived back in the early 2000s. The switch to streaming was coming, unless massive government support stepped up to stop it (which was never going to happen). But I also don’t think the idea of a theatrical release will ever fully disappear.
The past few days have seen a series of announcements related to “OTT” release of films (OTT being an old term that makes no sense, “over the top”, meaning a cable box. In this context, it is referring to online streaming services releasing films that were intended for a theatrical release. Being “Drive’d” to use the DCIB terminology). Prime announced a whole list of big name big deal movies they just picked up for premier release. The producers association released a statement explaining they simply could not afford to keep sitting on these films without a profit. And the various movie theater groups released statements saying they have faith that theaters will survive this crisis and will come back. There’s a lot to unpack in this situation, and I have many thoughts.
Let’s start with the producers. For most Indian film producers, there is no margin. Or rather, there is negative margin. They are deeply in debt by the time the film is completed, they need the money from the film release to even get back to 0, let alone make a profit. And that’s in the Hindi industry, where things are fairly stable. In the Tamil industry, based on what I have been told, you are just trying to get to a smaller negative number. Investors will hold any profits from a future film against losses from a past one, so the drive is to release Film D and make money is in hopes of paying off Film A, and then taking money from Film E to pay off Film B and so on and so forth, until eventually you die in debt.
It’s a very unhealthy business, and it doesn’t have to be any more, but it is almost impossible to break that kind of cycle once you are in it. Indian film makes oodles of money, if someone is cautious, gets the right kind of investment start up funds, and only makes moves after getting rock solid contracts signed and considering all the movements of the industry, they can have a stable long term income from films. That’s what Yash Raj Studios did, they lucked into DDLJ making an enormous amount of money just as technology (DVDs) and laws (liberalization of the economy) loosened things up to allow them to fold that money into investment and multiply it. But beyond that set of circumstances, they were just cautious. A slow build over years, avoiding any outside debts they would have to scramble to pay back, diversifying carefully as new technology arrived, and never starting a film unless they were sure they had the funds to finish it and if not make a profit, at least avoid debt.
Sounds easy, right? But you can only do it if you have the where withal to resist the flow of how things have “always” been done. Back in the bad old days when investment in films was limited, the only way to go about things was to make movies as fast as possible while you had the money and try to get your investment back, and convince everyone else to gamble with you. That’s still what everyone expects, artists and investors alike. If you say “I want to make this movie, but first I want to spend 4 months getting rock solid contracts, analyzing the budget to the penny, and considering the ebb and flow of the market at the present time”, then the response would be “that guy doesn’t really believe in his movie, I am avoiding him”. Not even “believe” in it in the artistic sense, “believe” in it in the commercial sense. If you think your movie will be a hit, then what do you care if the second lead’s contract has a clause about profit sharing? What do you even care about contracts, when it hits it big, just buy everyone a new car as a gift!
We see ripples of this attitude all the time, for example the way Karan Johar came out and apologized for Kalank. He’s the one who lost money, he made a bad business decision, but he didn’t phrase it as “I failed to properly assess the market and therefore my corporation shows a loss this quarter”, he phrased it as a passionate heartfelt decision that makes him miserable when it fails. That’s the expectation, that’s the peer pressure, if you really believe in the film, you will go all in on it. Otherwise, no one else will believe in you.
Which brings us to today. With movie theaters closed indefinitely, moves are not releasing. For most producers who went “all in”, that means they are losing more money every day as their ruinous loans keep taking on more interest payments, and the pure expense of keeping a company going adds up and up and up. A producer expects a quick pay out, even before the box office, because they sell the distribution rights ASAP to cover their debts and the distributors make the box office money. Now, distributors aren’t buying because theaters aren’t playing, and so producers are sitting on product they borrowed to manufactur and now can’t sell.
Think of it like a shoe factory. You get a design for a new high heeled shoe, you borrow tons of money because you are sure of the market for this design, and then just as you are about to start selling it to stores, a new law is passed in your country saying that high heel shoes are illegal because they are so damaging to the foot. You are sitting there with a pile of shoes and a pile of debts. You are desperate for money and ready to off load the shoes to anyone who will have them at any price. And now, enter the sleazy middle-man. He knows you are desperate to get rid of your shoes because he follows the news and knows that high heels are now illegal in your country. He is rich but eager to get richer, and he knows there is a market for high heels in the neighboring country. Shoes in your country cost $10 to make and sell for $20. Shoes in the neighboring country sell for $8. But right now, you can’t sell your shoes at all. So when this businessman shows up and says “I will give you $5 per shoe to take them off your hands”, you have no other choice and have to take the money he offers. And then the businessman turns around and takes the shoes to a new market and sells them for $7 (undercutting the local businesses) and makes a tidy profit while you, the shoe producer, are impoverished and the local shoe companies in the other country are driven out of business since they can’t compete. And eventually, no one has shoes at all because no one can afford to make them in the current market.
Using the shoe factory metaphor, what this market means is that the film industry of India will go bankrupt as they are forced to take below-cost money for their product. The theaters of India will go bankrupt as there is this burst of theatrical quality product available to the consumer at a lower cost. And the consumer themselves will eventually lose out as no one will be able to afford to make product for them any more.
But, good news! I think the sleazy middle-man (in this case streaming services) may be underestimating the loss to them of driving the movie factories of India out of business. Because they are treating the product like a shoe, and it isn’t really. It’s the idea of a shoe.
Prime and Netflix and Zee5 and now Disney+HotStar have been making massive amounts from Indian films with minimal investment, at the same time producers and distributors and theaters have been seeing losses on those same films. It has to do with marketing costs and how they are distributed. A film like Zero, for instance, made enough money to choke a horse on streaming and no money in theaters. The audience for various reasons was not willing to see it in theaters (ticket prices, access to screens, peer pressure, pick your reason). But the promotional campaign around the theatrical release, everything from press conferences to posts outside theaters, let them know about the film and got them excited for it. Once it hit streaming, that marketing effort that was aimed towards the theatrical release and paid for by the money budgeted for the theatrical release, benefited the streaming release.
There’s the immediate actual marketing budget, the line item paid for by the studio and distributors for hiring a room for the press conference and paying for TV ads, but also the hidden marketing budget that revolves primarily around Stars. The ineffable star power of a big screen movie star in India far outpaces the star power of anyone on a smaller screen. That is decades of investment, decades of people seeing their names and faces, decades of celebration for movie opening nights, decades of awards shows and live performances and everything else. Zero made money for streaming because the regular film industry invested 25 years in Shahrukh Khan long before Zero hit streaming.
I think these streaming companies may be getting in over their heads expecting that kind of profit from a theatrical film, that skips the theatrical release. Because I am a (very small) influencer in the market, and I know it’s going to affect me, so it will effect them. It already has. When there is a new theatrical release, I know about it because I look at the listings for my local theater. I go opening night, because every Friday is opening night. And I always see the new release, because it is what is playing. Now, I am already lost trying to figure out the release schedule for these streaming films. Like, what day of the week is it. What time. And where? It’s easy to find a movie in theaters, you just look at the theaters, but with these streaming releases even if the marketing campaign successfully tells me the date, they also have to drive into my head which is the source. Plus, as someone who loves movies, now I am torn between watching the newish streaming release (once I figure out when it is coming out and where), and an older release that I already know is high quality.
I’m not saying I am the prime mover in the market, but I am one of the people who makes the dominoes fall. I review a movie here, we talk about it here, it sticks in your mind, 3 months later it hits streaming and you remember my review, so you watch it. I’m one of millions of people who perform the same function in the world, and we are all of us (all many millions) going to be removed from the picture with streaming. That friend who sees the new movies every week, that twitter person you follow, they are no longer going to be bumping the newest films to the top of your consciousness. There will be no posters you pass on your way to work, no pop-up ads in your browser, no songs playing on the TV. The new movie will release, and will sink into the same massive stream of all movies available to you with nothing to make it special.
I just don’t think streaming services have any idea how much goes into these theatrical release promotions for Indian films before they swoop in and garner the profits. I also don’t think they have any idea how much of it relies on the sort of coordinated international effort they just can’t do. It seems like The Internet should lead to more of a global community for film, but at least in the case of Indian films, our experience has shown that it so SO doesn’t!
Just on the simplest level, every individual user of a streaming service has a unique interface. The streaming services are designed to narrowcast, to show you things they think you will want or let you search for exactly what you want. How is that going to work when they are trying to recreate a Wide Release promotion effect? In India they can just slam an ad across the top for all to see saying what new movie they have added. But what about those outside of India who are equally interested? How is Prime planing to alert all of us, say 10% of the non-Indian audience, without irritating the 90% who don’t care? It’s a unique market, one that both is and is not global, worldwide enough that you can’t afford to risk leaving that money on the table (unlike, say, French movies that you can probably just promote in France without much loss), but small enough that you can’t just promote across the board (unlike the big Hollywood films that you are safe promoting to every market).
So the end result is going to be films that release without a coordinated day of publicity push, which has long term consequences in lowering the overall audience (especially overseas), which means these movies that streaming services normally would have picked up and made a vast profit on thanks to the initial release promotions will now drift out unnoticed and end up losing them money.
I don’t know what the end of this will be, but one thought that occurs to me is streaming services supporting theatrical releases on a modest scale as a marketing expense. Think of the whole theater release like a critics showing that is necessary to get the word out to the audience. Yes, a lot of theaters are going to shutter, and yes more films will go straight to streaming after this, but I don’t think the movie industry that streaming relies on can survive without some form of “opening weekend theatrical release” in the world.
Or an alternative thought, perhaps streaming services will start promoting these major Indian releases to everyone everywhere, much more like Hollywood films, as they realize they can’t afford to lose any potential viewer, and the market will grow.